NEW DELHI: A controversial amendment allowing retrospective taxation of cross-border deals appears to contradict assurances given by Prime Minister Manmohan Singh to his British counterpart over Vodafone's purchase of Hutchison Essar.

Singh had assured then British prime minister Gordon Brown in a letter dated February 5, 2010 - a copy of which has been perused by ET - that retrospective taxation was not the norm in India and Vodafone would have the "full protection" of the law.

"I understand that there is no retrospective application of taxation and a recent court judgement has affirmed this position," Singh wrote to Brown.

"I can assure you that Vodafone will have the full protection of the law and access to the legal system in India," the Prime Minister promised in his letter, nearly two years before the apex court ruled in favour of Vodafone in January 2012.

Singh had written in response to two letters that he had received from the former British prime minister, on December 9 and December 15, 2009, raising concern over the tax claim. Brown had cautioned Singh at the time that taxing cross-border deals could affect India's investment climate by creating uncertainty for foreign investors.

India's Income Tax department had slapped a claim of 11,000 crore as withholding tax on British telecom company Vodafone for its $11 billion acquisition of Hutchison Essar in 2007, a claim subsequently dismissed by the Supreme Court.

The apex court ruled that Indian tax authorities did not have jurisdiction over the Vodafone-Hutchison deal, which was conducted overseas between Vodafone International Holdings BV, Vodafone's Dutch subsidiary which acquired CGP, a Cayman Islands-based company controlled by Hong Kong-based Hutchison.

The Prime Minister's Office refused to comment on the letter. "We don't want to comment as the case is sub-judice," said a PMO spokesman.

A government official, however, said Finance Minister Pranab Mukherjee's post-budget clarification is consistent with the Prime Minister's assurance to Brown.

Mukherjee had told industry associations in a post-budget interaction that the retrospective amendment did not mean the Income Tax Department would open all cases of indirect transfer of shares with underlying Indian assets from 1962 onwards.

Despite Singh's assurance and the court ruling, proposed changes to the Income Tax Act in the latest budget stipulate that any asset registered or incorporated outside India shall be deemed to be situated in India if the share or interest derives its value substantially from assets located in India. It further proposed that the amendment would take place retrospectively from April 1, 1962, potentially changing the rules of the game for Vodafone and other foreign investors in one of the fastest-growing large economies.

"I would like to assure you that the Government of India is fully committed to providing a transparent and growth-oriented environment for profitable international investment," Singh had written to Brown, who served as Britain's prime minister July 1, 2007 until May 2010.